RMG needs to diversify its core products for sustainable business: Experts

The readymade garment sector needs to shift its focus from traditional manufacturing to diversification of its five core items – T-shirts, shirts, trousers, sweaters, and jackets – to ensure business sustainability, RMG stakeholders said.

At a webinar on Friday, they also suggested manufacturers present their products and capabilities to buyers in a more effective manner.

Despite higher production costs, especially for raw material and transportation, in the readymade garments (RMG) sector of the country, foreign buyers are not revising their purchase prices commensurately, said industry leaders at the programme at Hotel Westin.

A B2B platform of HSBC, serai, organised the event, "Bangladesh exclusive: the road to a competitive & resilient export future", in collaboration with the Bangladesh Garment Manufacturer and Exporters Association (BGMEA), the Bangladesh Knitwear Manufacturer and Exporters Association (BKMEA), and the Ministry of Commerce. The Business Standard was the media partner of the event.

BGMEA Vice-President Shahidullah Azim, also managing director of Classic Group, acknowledged the importance of product diversification. "While 70% of the world's exported garments are made of manmade fibre, its share in our exports is only 3%."

Manmade fibre clothing also fetches a higher price, he said, adding that they are now encouraging members to make manmade fibre apparel.

"Foreign buyers prefer and seek open costing from us. Otherwise, they do not place orders," said Azim.

In an open costing process, the buyer is informed about the cost of raw materials and accessories, on the basis of which the buyer determines the price for placing the order.

Commerce ministry's Joint Secretary Abdur Rahim Khan said the country's RMG sector exports some 30 items. "But, 70% of these exports come from just five items. Our target is to increase the number of items gradually," he said.

Referring to his ministry's initiative to encourage in this regard, he said, "You will see a different policy next year on promoting manmade fibre."

There is no alternative to diversifying RMG products for the sustainability of the sector, he said.

According to the BGMEA, the price of Bangladesh's RMG products fell more than 5% in April this year compared to 2020.

Industry insiders think product diversification will help reduce this price pressure.

"The price of cotton, the main raw material, has been on the rise for the past few months. Overall, logistics expenditures including container expenses have also more than tripled. Bangladesh is also now a role model in green RMG factories, for which entrepreneurs had to invest and spend more too," BKMEA Vice-President Fazlee Shamim Ehsan said.

But despite the increase in spending and costs, foreign buyers are not raising prices proportionately, he said.

Remembering the Bangladesh government's sustainability compact agreement with the European Union for the RMG sector in the aftermath of Rana Plaza, he said, "There was a fair price issue as one of the three pillars of the deal, but neither side talks about it."

In this context, serai Chief Executive Officer (CEO), Vivek Ramachandran, said, "The supply capacity is more than global demand. Because of this excess capacity, the buyer will go where the price is lower.

"Therefore, the exporter has to think exceptionally. Besides manufacturing diversified products, you need to present your capabilities to the buyer properly. That is why we have to be focused on introducing technologies."

Agreeing with his suggestion, commerce ministry's Joint Secretary Abdur Rahim Khan, said, "We need to reduce the price pressure by increasing our efficiency. Cost of production should be reduced by increasing productivity. For this purpose, the use of state-of-the-art technologies and modern machineries should be considered."

He also said the government is focused on Free Trade Agreements (FTA) to continue to avail export benefits after Bangladesh graduates from being a Least Developed Country (LDC). The country is pursuing FTAs with at least 24 countries.

The webinar was moderated by Kutub Uddin Muhammad Jasim, a journalist with The Business Standard.